If a quarter can show that Microsoft’s growth no longer depends on Windows PC sales, this is its development trend.
Global PC shipments grew by only 1% in the second quarter, down from the 32% peak growth earlier this year. The global semiconductor shortage and supply chain bottleneck, coupled with the weakening demand for computers, have weakened the market on which Microsoft traditionally depends.
However, Wall Street predicts that Microsoft will grow significantly due to the increased demand for Microsoft azure, office 365 and other cloud services.
Microsoft announced its financial results for the three months ended September 30 (the first quarter of fiscal year 2022) on the afternoon of Tuesday, October 26. The average estimated revenue of Wall Street analysts was $43.97 (up 18%) and earnings per share was $2.07 (up 14%).
Wedbush securities analyst Daniel Ives wrote in a report to customers that the company’s cloud business is “entering the next stage of growth”. He cited the company’s latest inspection of enterprise software transactions.
Ives wrote: “with the acceleration of enterprise wide digital transformation, we see that the transaction scale continues to increase significantly. CIOs focus on preparing for their enterprise’s cloud driven architecture. MSFT will beat azure whisper’s growth rate of about 45% this quarter.”. “We believe that Wall Street’s view of slowing cloud growth at the other end of the WFH cycle is contrary to the trading activities seen by Microsoft in this field.”
The company’s office 365 price increase is also expected to help.
He predicted that Microsoft should “easily exceed Wall Street’s estimates”.
The continuous cloud growth will continue the steady growth trend of Microsoft’s software business productivity (see the figure above). Microsoft has transitioned from traditional sales and licensing to cloud based services and subscription billing.
A long-term question is whether Microsoft can promote its windows business in a similar way by launching windows 365, a subscription based service and part of its larger vision of “cloud PC”
Windows 11 and Microsoft’s new surface devices were not released until the end of the quarter. Unless the number of people buying new windows 11 computers to meet the needs of more powerful systems increases unexpectedly, the impact of these releases will not be reflected in Microsoft’s results on Tuesday.
Anyway, this is a free upgrade. We may have passed the day when the new Windows version generates enough excitement and interest on the new PC to significantly increase Microsoft’s revenue after its release.